Local shares tank below 7k-level as Omicron, Fed hold attention

MANILA, Philippines — Local equities saw one of their biggest sell-offs this year on Wednesday as fears over the heavily mutated Omicron variant and a faster taper by the US Federal Reserve sent investors panicking again.

The Philippine Stock Exchange index (PSEi) opened the month of December sinking below the 7,000-territory again after shedding 3.53% to finish at 6,974.06. The broader All-Shares index lost 2.70%.

It was a bloodbath across sub-indices, with property shares, which fell 5.01%, posting the biggest loss. This was followed by services (-3.71%), holding firms (-3.26%), financials (-2.36%), industrial (-2.36%) and mining & oil (-1.96%).

Foreign investors sold P1.25 billion worth of local shares more than they bought on Wednesday. A total of 1.37 billion stocks, valued at P14.43 billion, switched hands during the trading day.

Aniceto Pangan, equity trader at Diversified Securities, believed Wednesday’s rout was due in part to market reaction to Moderna chief executive Stéphane Bancel’s remarks indicating the need to create a new vaccine that would work on Omicron, which scientists fear could evade existing jabs to some degree.

“Market remained on selling mode particularly in the western market cascading to the Philippine market on comments by Moderna’s CEO that we’ll need to develop a new vaccine in order to contain the new Omicron variant,” Pangan said in a text message.

At home, the Omicron variant, first detected by South African scientists, has prompted local authorities to bar travelers from African countries. While little is still known about the new variant, economists warned that Omicron poses a big threat to the Philippines’ economic recovery.

Luis Limlingan of Manila-based brokerage Regina Capital said the local bourse’s slump could be partly due to fresh remarks from Fed boss Jerome Powell, who put the US central bank on the path to removing its vast financial support measures at a quicker pace than first flagged, and lifting interest rates next year.

However, Rastine Mercado, research head at Chinabank Securities, said the looming interest rate hikes from the US Fed is something that the market is already anticipating. Mercado explained that the sell-off was likely a “delayed reaction to Omicron variant news.”

“A more hawkish Fed wasn’t really unexpected considering how inflation has progressed. Worthy to note that most Asian markets are trading in the black today,” Mercado said in a text message.”

Indeed, most Asian markets ended in the positive territory on Wednesday following a less alarming outlook from the boss of BioNTech, which made a shot with Pfizer, that it was likely people would be protected against severe symptoms that Omicron might cause.

Tokyo and Hong Kong, which both went south soon after the Bancel comments were released, saw much-needed gains. Shanghai, Singapore, Seoul, Wellington, Mumbai, Bangkok and Taipei also rose, and investors took heart from data showing factory activity across the region expanding last month.

Jakarta, meanwhile, joined Manila in the sell-off. — with AFP